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Oregon Gov. John Kitzhaber's 2012 State of the State Address

Read Oregon Gov. John Kitzhaber's 2012 State of the State Address

February 22, 2012

Thank you for that kind introduction. I’m proud of the progress we have made during the past year. We have not shied away from tough decisions – on the budget, education and health care – to put Oregon on a more sustainable path. And it’s been refreshing to partner with a legislature that has put problem-solving ahead of partisanship. We have come a long way.

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I’ve been unable to shake an image from an Oregonian story I read in October. It’s an image of an extension cord. An extension cord that runs from one Crook County house to that of her neighbor, providing power because she has gone without heat or electricity for six months. She has exhausted her unemployment benefits and is living on the edge.

That extension cord is her fragile lifeline and a harsh reminder that we are at or near the high point in terms of human need in Oregon, at the very moment when we are at or near a low point in state revenue to provide critical public services. That extension cord is also a symbol of our interconnectedness as Oregonians – the realization that together we will weather this economic uncertainty and emerge stronger and more united than where we began.

My optimism about Oregon’s future is rooted in places like Crook County, where even with double digit unemployment and under-employment pushing 30 percent, the words of Ken Kesey still ring true.

“Oregon is a citadel of the spirit.”

Because the Oregonian story is also the story of the woman’s landlord, who has cut her rent in half and kept her from going homeless; and it’s the story of her neighbor, who shares her power despite being two months behind on her own mortgage after losing her job.

We continue to recognize we are all in this together. But extension cords and good neighbors only go so far. The more Oregonians are pushed to the margins, the more we all will pay the price. The urgency that underlies all we have taken on this first year in office is rooted in my belief that embedded in this recession is a profound opportunity to change – change that is necessary to secure a more prosperous future for our state, and change that is based on our innovative spirit, our shared commitment to one another, and our core strengths and assets.

I’m here to tell you that this vision still stands – Oregon’s best days are ahead, and much of the work to move us forward is already under way.

When I last spoke to you here at the Portland City Club, just 10 months ago, I focused on two things: first, on the importance of getting the private sector going again, and second, on the equal importance of redesigning the systems through which we deliver public services, beginning with education and health care. We have made progress on both fronts.

I focused my remarks to the Oregon Business Summit last month on our efforts to be an effective partner with the private sector in helping to get the economy moving again. And though we still have a long way to go to put our people back to work – we are making progress. I know Treasurer Wheeler was here in September to discuss the Invest Oregon Act, a proposal which I fully support and believe to be essential to enhancing the financial health of our state by expanding access to capital for Oregon businesses. But the point I want to make to you today is this: all of our job creation and economic development strategies will be futile in the long run unless we are successful in transforming our system of public education and our health care system.

Public education because none of us should be willing to accept 65 percent high school graduation rates or the fact that this generation of Oregon children could be the first to be less educated than their parents and their peers around the United States.

Health care because we can no longer simply stand by while businesses, families, and your state government are forced to spend more and more every year on an inefficient, hyper-inflationary system that is not making us healthier as a population – dollars that otherwise businesses could be using to create new jobs; families could be using to get out of debt and pay off their mortgages; and the state could be using to invest in children and education.

In last year’s legislative session we set the state stage for fundamental changes to our health care system and our system of public education – changes that are absolutely critical to securing Oregon’s long-term economic future.

In education – with the creation of the Oregon Education Investment Board and legislation promoting the professional development of teachers and more learning options for students – the Legislature took the first steps toward a more student-centered system. For the first time, funding and governance will be aligned across the full continuum from early childhood services through K-12 and post-secondary education and training to achieve our state’s educational, social and economic objectives.

The Legislature also created the Early Learning Council focused on restructuring the fragmented, inefficient way we provide early childhood services. Currently, we spend over $800 million every biennium on programs for children ages 0-5, yet 40 percent of our children still arrive at school at risk because their needs were not adequately addressed. Continuing to support a system with these outcomes should no longer to be acceptable to any of us.

In health care, we created the state's first health insurance exchange to provide individuals and small businesses with easy to compare information on the quality and price of various health plans. The nine-member Board of Directors of this new public corporation has been confirmed by the Senate and is meeting monthly.

In addition, with bold, bipartisan legislative leadership we committed to transforming the delivery of health care to reduce year-over-year cost increases while improving health outcomes for Oregonians. The business plan for our new “Coordinated Care Organizations” – which will be the primary tool for health care transformation – shifts the focus and financial incentives from the emergency room and after-the-fact acute care to prevention, early intervention, and community-based management of chronic conditions. The potential cost savings for the state are substantial – more than $3 billion in the next five years – and will ensure that our most vulnerable citizens maintain coverage, while freeing resources for other public priorities and providing a model for the commercial health insurance market.

But in both health care and public education, our success to date has been in setting the stage for change; now comes the hard work of implementation. Our ongoing success depends on working together in the upcoming session on the legislative tools needed to build the momentum to date and begin implementation.

Before I turn to the bills necessary to get the job done, however, let me pause and remind you that real change is always uncomfortable.

When I spoke at the City Club a year ago, I offered an analogy that compared the development of the systems through which we provide public education and health care with the development a successful business. You may recall we did a little art project on the stage.

We looked at when the environment in which a business operates begins to change: the growth curve flattens out. And if the organization does not change its business model to reflect the new environment, it will go into a decline.

Successful businesses, however – when they recognize that the environment is changing – redesign their business plan to accommodate the changing environment – creating a new growth model based of the realities of the present rather than on those of the past.

For a period of time, both curves must co-exist in order for the second curve to thrive – an area of overlap that Charles Handy refers to as the “Area of Paradox.”

This is an area of high anxiety; there is a lot of churning and insecurity. People know that things are changing; they know that the current system is not working for them – but they are afraid of the unknown.

I believe that now, more than ever, this is exactly where we find ourselves – in this area of paradox: in both public education and in health care. We are well down the road to transformational change – to creating new business models – but we are at a critical moment. Some are suggesting we have come too far, too fast. What I hear from Oregonians is that we have not come far enough. We cannot lose our nerve at this critical moment, and we must forge ahead together.

Twenty-one Oregon counties still struggle with double-digit unemployment. One in four Oregon children does not get enough to eat. Half of all African American children in our state live in poverty.

Try to imagine a child at age six, showing up for the first day of kindergarten, unable to match any spoken or written words, or understand that print is read from left to right. It’s difficult to imagine the huge disadvantage they have unable to sound out words – or worse yet, trying to do so while going hungry. But this is the reality for far too many Oregon children who are not getting the health care, pre-school, nutritional and developmental services they need before age five – including prenatal care. They do not arrive at kindergarten ready for school.

You may not know a child like this personally, but you see them every time you pass an elementary school – kids who are hungry, in poverty, kids in danger of not making it.

We have the chance to do something meaningful about it. All the research indicates that children who are ready for kindergarten, reading in first grade, and reading at grade level by third grade, are more likely to graduate from high school and find social and economic success. And early childhood success is a cornerstone of all of our broader educational and economic goals.

In 2006, the City Club adopted a report on Early Care and Education that noted the “multiple programs across numerous state agencies with no clear vision” and called on state officials to “strengthen Oregon’s statutory effort to coordinate disparate early childhood programs.”

My early learning bill will do just that – implementing the recommendations of the Early Learning Council to streamline disparate programs as part of a plan to ensure coordination and accountability; consolidating boards and getting programs focused on outcomes for children and families. We need to serve more at-risk kids and make sure they’re ready to learn from day one. We need to be able to measure program effectiveness before children reach kindergarten, and better transition them once they reach the K-12 system.

Every year we delay, another 46,000 children are born in Oregon and at least 40 percent are at-risk – risk that society usually pays for down the road – in school failure and drop out, in social dependency, in the criminal justice system and in lost opportunity.

Yet you hear these changes are happening too fast. For whom? Certainly not the 18,000 at-risk kids born every year. For them, change can’t happen fast enough.

Your vocal support for this legislation will allow us to move from diagnosing and analyzing the problem to solving it, getting us back on track to do right by our children and positioning this state and its citizens for prosperity.

A second education bill is necessary in February. Next year’s kindergarten class marks a new beginning. These kids will graduate from high school in 2025, the target date for achieving our goal of 100 percent high school graduation for Oregon students. That’s just 13 years away and a tall order given that just yesterday, Education Week ranked Oregon 46 out of 50 states in K-12 achievement.

Our choice for the class of 2025 is clear: we can continue the decade-long experiment with the federal No Child Left Behind law and its one-size-fits-all approach to school accountability, or we can adopt our own tailored approach to improve student outcomes. We can stick with federal control and an Oregon high school graduation rate stubbornly stuck at 65 percent, or we can take responsibility as a state to work together – as teachers, parents, district administrators, legislators and the broader community – to devise a system that allows more flexibility while pushing every school and every district toward better student outcomes. We can continue to label schools as failing and over-rely on standardized testing as the single measure for student achievement, or we can recognize there is not a single formula for school improvement, and instead set meaningful goals for performance on a small number of outcome-focused measures such as third-grade reading, high school graduation and closing the achievement gap that, if met, can accelerate learning and free up resources vital to providing comprehensive education.

The choice is clear, and the time is now. We have an opportunity to obtain a waiver from the punitive provision of the No Child Left Behind Law if we can create a home-grown alternative that provides smart accountability and better paths to student success. The second bill I’m introducing in February creates educational achievement compacts and is essential to obtaining a waiver. The legislation is also essential to meeting our goal of 100 percent high school graduation for Oregonians by 2025; with 80 percent of those graduates receiving at least two years of post-secondary education or training; and 40 percent earning a bachelor’s degree or higher.

Achievement compacts replace the federal, compliance-based approach with partnership agreements between the state and our educational institutions – school districts, community colleges and universities. The compacts express a common commitment to improving outcomes, but tailor outcomes to unique circumstances of individual districts. And they allow for the comparison of results and progress between districts with comparable populations. The achievement compacts will begin to connect funding to outcomes so the state can become, over time, a smarter “investor” in education.

If we fail to make this shift, we will continue to have education funding debates without context and without a real connection to what different funding levels mean for student success. And if we fail to pass achievement compacts in February, we’ll be left with the status quo under No Child Left Behind – an outcome everyone agrees is unacceptable.

Let me be clear about the issue of funding. We will not achieve our ambitious goals for educational attainment without additional resources. As I have said before, our system of public education is underfunded at all levels. In higher education, for example, the capacity of our public universities will need to expand significantly to accommodate tens of thousands of additional graduates. Class sizes in K-12 need to be smaller; courses like art and music and PE and in career and technical skills need to be added back in. But we can’t permit the debate about new resources to be the only debate we hold. We can’t permit the absence of adequate funding to foreclose a real discussion about how to more effectively spend the resources we’ve got. After all, perhaps the best source of ‘new funding’ for K-12 would be for more 5-year-olds to arrive at kindergarten ready to learn, reducing the need for expensive remediation at school. Yes, new resources will need to be put on the table. But we need to target existing resources to leverage points – like early learning, third-grade reading, and college completion – that are proven to significantly drive costs down.

With regard to health care, action in the next month’s session is equally crucial, and I will be introducing two bills: one to fully implement our new health insurance exchange, and the second to gain legislative approval to proceed with the establishment of coordinated care organizations across the state. As with education, there those who are worried about how this is going to work out; about how and whether the savings will be realized in the second year of the biennium.

So let me pause again and put this concern into the perspective of what is going on in or nation’s capital as it pertains to America’s escalating national debt – and the implications that has for the health care system here in Oregon.

I assume all of you have a personal credit card. And that card has a credit limit beyond which you cannot make charges. The federal government also has a credit limit – the debt ceiling which is set by Congress and periodically raised to give the federal government the ability to continue to borrow.

With your personal credit card, your credit limit is based on what you are able to repay. If you are unable to make your payments, your credit limit is reduced or, in some cases your card – and your ability to borrow – is canceled. With Congress, the inability to pay off our debt obligations amounts to default on the national debt … a specter now playing out now in Greece, Italy, and Spain.

But in the U.S. Congress, the debate over raising the debt ceiling is not based on a thoughtful discussion of our ability to repay the debt but rather increasingly on the politics of maintaining current programs without having to raises taxes to pay for them. It is deemed politically risky to reduce spending on programs like Medicare and Medicaid or defense; or to raise the taxes necessary to pay for them – particular in an election year. So we simply continue to run up the tab on our children’s credit card.

That partisan political dynamic is exactly what we witnessed in the high stakes game of chicken that was played out in Washington, D.C, last August over raising the debt ceiling to prevent the United States from defaulting.

It was not our finest hour. In the end, Congress once more kicked the can down the road to 2013 by raising the debt ceiling by $2.1 trillion, while doing almost nothing to address the real underlying driver of our national debt: the intersection of an aging society and a hyperinflationary medical system.

Congress also created the “Super Committee” tasked with finding a bipartisan pathway to reducing the national debt. As you know, the committee utterly failed in its charge, triggering $1.2 trillion in automatic spending cuts over the next 10 years. But $1.2 trillion is a drop in the bucket given the magnitude of what we are facing. Consider the fact that this $1.2 trillion in spending cuts (or savings) is spread out over ten years – starting in 2013; but we will have eaten up the $2.1 trillion increase in our debt ceiling by early the same year. In other words, we plan to spread $1.2 trillion in savings over the next 10 years while increasing our national debt by nearly twice that much in the next 14 months.

And one year ago, the first of 78 million Baby Boomers started becoming eligible for the Medicare program – which means 10,000 new enrollees per day, every day, for the next 20 years. These are people who become entitled to publicly-financed health care at the age of 65, many of whom will live for another 20 or 25 years, while the cost of their care will grow much faster than general inflation. Indeed, by 2020 the average Medicare recipient will be taking $3 out of the Medicare program for every $1 they paid in over their lifetime.

My point is that regardless of who wins the presidency – regardless of which party controls Congress a year from now – there is no way to rein in the national debt without taking on the cost of Medicare and Medicaid – a fact that will be starkly apparent when Congress is forced to raise the debt ceiling again in 2013. And, absent a rational pathway to a new delivery Congress will simply shut off the tap – because currently there is no other option.

That is a real problem for an industry based on a business model that assumes the public and private employers will continue to cover a medical inflation rate of 10 percent a year. Those days are gone forever.

And that brings us back to Oregon – and to the $200 million in additional health care savings we hope to secure in the second year of the biennium. While that may seem daunting as we sit here today – consider a shortfall in the billions, which is what we are surely looking at if we continue to cling to the status quo.

There are those who remain in denial – those who still believe that if they can simply delay the process we have started here, the problem will somehow go away. It won’t. Health reform is not just about politics, it is ultimately about economics. The laws of economics are as immutable as the laws of physics. The reaction times are just longer – but we are rapidly approaching the end of the runway for health care financing as we know it today.

Gaining approval from the legislature next month to fully implement Oregon’s Health Insurance Exchange and to move forward with the establishment of Coordinated Care Organizations is our chance to put into place a system that is economically sustainable.

Some local communities have done a great job of finding innovative ways to do things better, but there hasn't yet been a statewide approach to providing high-quality health care while keeping costs under control. The establishment of Coordinated Care Organizations is a potential game changer, shifting the focus to prevention and patient outcomes by integrating physical health, mental health, and oral health, and managing costs with a global budget.

Oregon has the opportunity to provide a rational way forward, one that will help our state weather the fiscal storm that is surely headed our way as Congress again bumps up against the debt ceiling next year.

The choice is ours alone to make.

And while we’re well down the road toward transforming our health care and education systems, we must lock-in these changes this February to allow us to begin taking on other pressing issues facing our state:

Establishing a revenue system that can weather our boom and bust economic cycles.

Improving public safety to protect Oregonians from crime while reducing the costs to our state and to our citizens.

Working toward a more sensible timber management policy that integrates State and Federal approaches.

And redesigning our budget to align public investments with specific outcomes.

To move forward, we must find the courage to challenge the status quo, and to believe in our own ability to shape the future. I am not suggesting that there is no risk involved in the journey on which we have embarked. But I am suggesting that there is a lot more risk in the status quo; that the riskiest thing we can do right now is to continue to cling to what we are doing today – because we know where that is taking us and it is not to a good place.

Theodore Roosevelt once said: “In any moment of decision, the best thing you can do is the right thing. The worst thing you can do is nothing.”

As Oregonians, we understand delay is not some benign and prudent placeholder. It is a choice… a choice to reaffirm the status quo; it is a choice to abandon tens of thousands of Oregon children; it is a choice to spend more and more on health care and less and less on education – in short it is a choice to abandon the responsibility we owe to the next generation, a choice to fail the future.

Though laid low by economic uncertainty, Oregon has shown bright this past year, in the resilience of its communities, in the civility of its political discourse, and in the optimism of its citizens. Because you recognize your shared responsibility in shaping our future, Oregon continues to be a citadel of the spirit.

Our priorities are the right ones. Our sense of urgency remains acute. We must maintain the courage to forge ahead with the promise of an even brighter future.

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